The price of Bitcoin reached record levels in 2021 thanks to the support of traditional financial institutions, but cryptocurrency experts are struggling to predict the outcome next year for this variable sector.
Having more than tripled in value to $60,000 between December 2020 and April this year, Bitcoin lost momentum to trade below $50,000 before the new year.
“The current volatile and disproportionate price action with the possibility of further downward pressure has brought a lot of uncertainty to the digital property market,” said Lucas Lagudis, executive director of the cryptocurrency investment fund ARK36.
He added, however, that “the sustainable adoption of digital assets by institutional investors and their further integration into old financial systems will be the main drivers of crypto space growth” during 2022.
The rise of Bitcoin in 2021 coincided with Wall Street’s growing appetite for cryptocurrencies.
The record value in April happened with the debut of the cryptocurrency exchange Coinbase.
The October peak above $66,000 followed the launch of a fund that trades on Bitcoin futures(ETFs), or a type of financial instrument, on the New York Stock Exchange.
Tesla’s CEO, Elon Musk, has helped the market rise – but also fall – with controversial cryptocurrency tweets.
El Salvador’s move in September to make Bitcoin a legal tender in the country also drew attention.
But the pressure has also come from China’s dealings with cryptocurrency trading and mining, while the risk of broader regulatory action, such as Europe and the United States, is straining Bitcoin.
“One thing is for sure, the voices calling for crypto-regulation, whether it’s for stricter consumer protection or just clarifying rules for institutions, are getting louder,” said Huong Hauduc, general adviser at the Bequant digital media exchange.
Created after the global financial crisis in 2008, Bitcoin initially promoted the libertarian ideal and sought to overthrow traditional monetary and financial institutions such as central banks.
In recent times, activists fighting climate change have drawn attention to the huge amount of electricity used to power computers needed to mine new Bitcoin tokens.
According to some analysts, Bitcoin is in danger of increased competition as it enters 2022, especially from its closest rival Ethereum.
In November, Twitter co-founder and CEO Jack Dorsey announced his departure from the social media platform, with the intention of dedicating himself to his digital payment company, which wants to expand to cryptocurrencies.
According to the specialized site CoinGecko, the cryptocurrency sector has a total market value of 2.36 trillion dollars, while Bitcoin alone is worth 900 billion dollars, reports Gadgets 360.
For analyst Frank Downing, “Bitcoin’s reluctance to evolve its design” compared to Ethereum is, in fact, “a feature that provides the stability and consistency needed to serve as real global money.”